Banks are not able to fail because of deposit insurance

Because of deposit insurance it is illegal for banks to be insolvent and go out of business.

Without deposit insurance most banks which operate with insufficient reserves would fail, so then Fractional-reserve banking is not a chosen service and not of the market because it relies upon State intervention to exist. In a free market banks would be required by their customers to retain a high level of reserves, this is no longer a stipulation (by their customers) because of deposit insurance. Because of deposit insurance banks do not need to keep a high level of reserves. If there is no deposit insurance banks are not operating a Fractional-reserve system, even if they don't have enough reserves, in this situation they would be insolvent, which is very different from having (being allowed to have) Fractional-reserves. Without the existence of deposit insurance, no bank may be rightly described as a Fractional-reserve bank, only those with deposit insurance are so. If we advocate a free market then we know that this does not include Fractional-reserve banking.

Definition: Fractional-reserve banking does not mean insolvent banking, it specifically means the result of State intervention and deposit insurance.

An insolvent bank, in the free market, is not operating under Fractional-reserve conditions, it is simply nothing more than insolvent. Fractional-reserve banking is when a bank which would otherwise be considered to be insolvent is protected by the State and hence is no longer (then) insolvent. Fractional-reserve banking means that it is illegal for banks to be insolvent.